New funding routes must be found to keep plans on track

Political Editor John Downing finds inflation is hitting the roads programme

IRELAND is experiencing an unprecedented era of road-building backed by the biggest funding programme ever.

That's the good news. The bad news is as each day ticks on the funding allocation of over 1 billion per year gets taxpayers less and less road for their money.

Construction inflation has taken a heavy toll. It ran at 15% in 1999 and 2000, came down to about 10% in 2001, and some optimistic projections suggest it might be as low as 6% this year. Other problems leading to delays, such as planning objections, unforeseen construction difficulties, and the continued rise of land prices, will also take their toll.

In practical terms, motorists find Progress is slow. In the late 1980s Ireland was placed last for efficiency of transport infrastructure among the world's most developed nations by the in the 27-nation OECD. By now we are ranked 13th among the EU's 15 member states.

The ambitious road-building programme outlined in the 2000-2006 National Development Plan (NDP) is progressing and is changing things but ever so slowly as the traffic volumes also increase. Drivers find that as one bottleneck is eliminated, another appears further down the road. It means drivers just get to the traffic jam more quickly.

Unsurprisingly, there is a dispute about the level of the funding shortfall and its impact.

There are currently 201km of new roads under construction 129km of which are either of motorway or dual carriageway standard. But no new project will start in 2002.

Seamus Brennan, who heads the newly-created Transport & Infrastructure Department, reckons that, on average, road projects end up costing 28% more than initially envisaged at the end of a three-year span taken to complete it.

He says he is guaranteed to have something in excess of 1bn for each remaining year of the NDP but needs to raise in excess of 2bn, or 500m per year, over the same period to realise the targets.

The builders' organisation, CIF, finds Mr Brennan's shortfall estimate rather timid and suggests the real figure is some 9bn.

The National Roads Authority (NRA), charged since 1994 with delivering new roads, is positioned somewhere between the hammer and the anvil on this issue. But more recently there have been signs that the NRA accepts that the builders' estimate may be nearer the mark.

Mr Brennan says efforts are continuing apace to find ways of delivering more road miles through four separate strategies.

The first is an attempt to agree fixed-price contracts at the outset with the construction firms. Mr Brennan says such contracts will themselves cost a premium to make the risk worth the builders' while.

"It might, for argument's sake, be something like 5% extra on top. But thereafter, if they hit rock, or if there's flooding, or strikes, these would become their problems and not the subject of extra costs to taxpayers," he says.

The second involves using the planned National Development Finance Agency to borrow extra money including the possibility of investment funds from National Pension Reserve Fund which has 2.3bn in spare cash currently. Transport Department officials stress this is not a raid on the pension funds, merely an effort to persuade its managers to invest in Irish road building.

But the finance agency's fundraising efforts cannot, as the Government hoped, be exempted from the EU single currency membership rules on borrowing. The ruling by the EU agency, Eurostat, that it must be counted in assessing deficits takes some of the gloss off the original idea.

The third strategy involves attracting private investors who would be rewarded by road toll revenues, probably over a long number of years to come. The so-called Public-Private Partnerships, or PPPs, have long been mooted as the cure for many ills.

The tolls on motorists, however, always risk becoming a political issue. But a survey for the NRA last October showed that more than half of road users could live with reasonable user tariffs.

The final and undoubtedly most controversial idea includes raising a special levy on petrol with a figure of 5c being mooted.

A study by consultants KPMG for the National Roads Authority cites this option of a petrol tax among one of a number of ways to go.

Mr Brennan remains noncommittal on this, promising only to study the idea.

The NRA survey last October showed only one in 20 people favoured a petrol levy to fund road building. But, despite motorists' resistance, a petrol tax has a number of attractions.

First off it would appear to be fair in so far as road users would be charged in proportion to their use of facilities. Secondly, there is some leeway on petrol prices, which are now lower than the norm in the EU.

But the potential impact on inflation remains a huge bugbear. Ireland's inflation rate of 4.5% is already over twice the average rate in the 12 eurozone countries. Petrol prices are included in the mechanism for calculating inflation and would have a big impact on it.

On top of the direct impact comes the knock-on effect of all sectors justifying price increases on the basis of increased transport costs. This in turn could lead to wage claims as the problem went all the way round the mulberry bush.

But for the moment, as the Transport Minister seeks ways of keeping the road-building programme motoring along, nothing can be ruled in or out.